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On the Persistence of Leadership or Leapfrogging in International Trade

Author

Listed:
  • Massimo MOTTA
  • Jean-François THISSE
  • Antonio CABRALES

Abstract

When two countries starting from different quality levels (reflecting different conditions on domestic market demands) open to trade, two possible equilibria arise. In the first one, the quality leader maintains its position. In the second, leapfrogging occurs. However, the latter is possible only if the initial quality gap is not too wide. Further, when the risk dominance criterion is used, only the former equilibrium is selected.

Suggested Citation

  • Massimo MOTTA & Jean-François THISSE & Antonio CABRALES, 1996. "On the Persistence of Leadership or Leapfrogging in International Trade," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9625, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:9625
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    Keywords

    international trade; product differentiation; country asymmetries; integrated markets; segmented markets; equilibrium section;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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